Bloomberg News

Iran Closing Hormuz Strait Would Hurt Tankers, Arctic Says

January 04, 2012

(Updates tanker bookings in seventh paragraph.)

Jan. 3 (Bloomberg) -- Iran’s threatened closing of the Strait of Hormuz, the biggest global chokepoint for seaborne oil trade, would cut demand for the largest tankers by blocking their busiest route, according to Arctic Securities ASA.

Very large crude carriers would have fewer cargoes from the Persian Gulf, the biggest source of shipments, said Erik Nikolai Stavseth, an Oslo-based analyst at Arctic. Each of the vessels can haul 2 million barrels of oil. Almost 17 million barrels moved through the strait daily in 2011, the U.S. Department of Energy said Dec. 30.

“While we think the situation is still absolutely a worst- case scenario, we see a closure as negative for the tanker market, as the world’s largest taker of VLCCs would be out,” Stavseth said in an e-mailed note yesterday. “The sheer drop in volumes would lead to negative ton-miles,” he said, referring to a gauge of demand for shipping.

Iran will block oil shipments through the waterway if sanctions are imposed on its crude exports, the official Islamic Republic News Agency reported Dec. 27, citing Vice President Mohammad Reza Rahimi. The U.K. and France are pushing for the 27 European Union nations to ban imports of Iranian oil as soon as this month to pressure the Islamic republic to abandon its suspected nuclear-weapons program. Iran claims its nuclear program is for peaceful purposes.

$101.68 a Barrel

Crude traded in New York rose as much as 2.9 percent today, the most since Dec. 20, to $101.68 a barrel. Earnings for supertankers on the benchmark route between Saudi Arabia and Japan slid 23 percent in 2011 from the start of the year, according to the Baltic Exchange, the London-based publisher of shipping costs.

About 35 percent of the world’s seaborne oil in 2011 passed through the strait, which connects the Persian Gulf with the Gulf of Oman and the Arabian Sea, a DOE report showed. Almost 20 percent of oil traded worldwide crossed the waterway last year, up from 17 percent in 2009.

Oil companies hired 140 vessels in December, the biggest monthly tally since at least 2005, according to data from Galbraith’s Ltd., a London-based shipbroker. The number of charters advanced in part because some traders are concerned Iran may disrupt shipments from the region if Europe bans cargoes from the Persian Gulf country, U.K.-based consultant FACTS Global Energy said Dec. 22.

More than 22 percent of supertankers signaling future destinations are bound for the gulf, according to vessel- tracking data compiled by Bloomberg. Ton-mile demand is calculated by multiplying cargo volume and distance shipped.

Iran’s navy started a 10-day exercise involving submarines and ground-to-sea missiles east of the strait, Press TV said Dec. 24.

--Editors: Dan Weeks, Claudia Carpenter.

To contact the reporter on this story: Isaac Arnsdorf in London at iarnsdorf@bloomberg.net

To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net


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